LSE 'is still Nasdaq link favourite'

The London Stock Exchange is understood to remain Nasdaq's favoured merger candidate in Europe despite a leaked document which suggested that the US hi-tech market is becoming increasingly frustrated by the lack of progress in negotiations.

The Americans are keen to increase the pressure on LSE chairman Don Cruickshank to put Nasdaq's proposals to his shareholders. The paper, prepared by Nasdaq adviser Dresdner Kleinwort Benson, suggested that if there was no progress within the next month, Nasdaq would switch its attentions to Deutsche Börse or Euronext, the merged French, Dutch and Belgian exchanges.

An LSE spokesman declined to comment on the Nasdaq paper but said: 'All the exchanges are still talking with each other.'

But the relationship between London and Frankfurt, which failed to merge earlier this year, hit a new low after the German exchange demanded 10m euros (£6m) from the LSE as compensation for the costs it incurred trying to set up the venture. The LSE will 'vigorously contest that claim'.